Registration of Limited Liability Partnership in India

In this article, we will discuss about the Registration of Limited Liability Partnership in India. How to register LLP in India?

What is a Limited Liability Partnership?

A Limited Liability Partnership (LLP) is a corporate business vehicle that provides the benefits of limited liability to its partners, similar to a company, while allowing them the flexibility of organising their internal structure as a partnership based on a mutually agreed limited liability partnership agreement. Unlike traditional partnerships where partners have unlimited liability, a limited liability partnership limits the liability of each partner to their agreed contribution, protecting personal assets from business liabilities.

Key Features of Limited Liability Partnership

• Separate Legal Entity: A limited liability partnership is a separate legal entity from its partners. This means that the limited liability partnership can own assets, enter contracts, sue and be sued in its name, thereby providing greater credibility and continuity to the business.
• Limited Liability: The liability of the partners in a limited liability partnership is limited to the extent of their capital contribution. This protects the personal assets of partners from the business’s debts and obligations, similar to shareholders in a company.
• Perpetual Succession: The existence of a limited liability partnership is not affected by changes in the partnership, such as the death or insolvency of a partner. This ensures the continuity of the business.
• No Minimum Capital Requirement: Unlike private or public limited companies, there is no minimum capital requirement for forming an LLP. It can be established with any amount of capital agreed upon by the partners.
• Ease of Transfer of Ownership: Ownership in a limited liability partnership can be easily transferred by introducing new partners or by transferring the rights and obligations of existing partners.
• Lower Compliance Requirements: LLPs are subject to fewer regulatory compliances compared to companies, making it a cost-effective business structure, especially for small and medium-sized enterprises (SMEs).

Advantages of Limited Liability Partnership

• Flexibility in Management: LLPs offer flexibility in terms of management and decision-making processes. The internal structure and governance of the limited liability partnership can be designed as per the agreement between the partners, allowing them to operate in a manner that best suits their business needs.
• Limited Liability: One of the most significant advantages of a limited liability partnership is the limited liability protection it offers to its partners. Unlike traditional partnerships where partners are personally liable for the firm’s obligations, limited liability partnership partners are only liable to the extent of their capital contribution.
• No Audit Requirement: LLPs are not required to undergo an audit if their annual turnover is less than ₹40 lakh or their capital contribution does not exceed ₹25 lakh. This reduces the administrative burden and associated costs.
• Tax Benefits: LLPs are taxed as a partnership firm, which means the income of the limited liability partnership is taxed at the corporate tax rate, but the distribution of profits to partners is exempt from further tax, unlike dividends in a company.
• Separate Legal Entity: The separate legal entity status of a limited liability partnership allows it to own property, incur debt and enter into contracts independently of its partners. This enhances the credibility of the limited liability partnership and provides greater protection to the partners’ personal assets.

Disadvantages of Limited Liability Partnership

• Limited Access to Capital: LLPs cannot raise equity capital from the public or issue shares like a company. This makes it challenging for LLPs to attract investors and raise large amounts of capital.
• Heavy Penalties for Non-Compliance: Despite having fewer compliance requirements, LLPs are subject to significant penalties if they fail to comply with statutory requirements, such as filing annual returns or financial statements.
• Limited Recognition Globally: While LLPs are recognised and accepted in India, they may not be as widely recognised in other countries, which could pose challenges for businesses looking to expand internationally.
• Complexity in Dissolution: Dissolving a limited liability partnership can be more complex and time-consuming compared to a traditional partnership, as it involves various legal procedures and formalities.
• Inability to Go Public: LLPs do not have the option to go public or list their shares on a stock exchange. This limits their ability to raise funds from the public and achieve significant growth through public investment.

Limited Liability Partnership Registration Process in India

The process of registering a limited liability partnership in India involves several steps, from obtaining digital signatures to filing the limited liability partnership agreement. Below is a detailed guide to each step in the registration process.

Step 1: Obtain Digital Signature Certificate (DSC)

The first step in the limited liability partnership registration process is obtaining a Digital Signature Certificate (DSC) for all designated partners. Since the limited liability partnership registration process is entirely online, digital signatures are required to sign electronic documents. The DSCs must be obtained from government-recognised certifying authorities. Procedure to Obtain DSC:

• Choose a government-approved certifying agency.
• Submit the required documents, including identity proof and address proof of the designated partners.
• Complete the verification process.
• Receive the DSC, which is valid for one or two years.

Step 2: Apply for Designated Partner Identification Number (DPIN)

The next step is to apply for the Designated Partner Identification Number (DPIN) for all designated partners. The DPIN is a unique identification number assigned to each designated partner, similar to the Director Identification Number (DIN) used for company directors. Procedure to Apply for DPIN:

• Fill out Form DIR-3 with the required details.
• Attach scanned copies of the applicant’s PAN card and Aadhaar card.
• The form must be digitally signed by a practising Chartered Accountant, Company Secretary or Cost Accountant.
• Submit the form to the Ministry of Corporate Affairs (MCA) for approval.

Step 3: Name Approval

Once the DPIN is obtained, the next step is to reserve the name of the LLP. The name must be unique and not similar to any existing company, LLP or trademark. Procedure for Name Approval:

• Conduct a name search on the MCA portal to ensure the desired name is not already in use.
• File Form RUN-LLP (Reserve Unique Name-Limited Liability Partnership) to reserve the name.
• Provide up to two name options in the form, in order of preference.
• If the name is approved, it will be reserved for a period of three months, during which the limited liability partnership must be incorporated.

Step 4: Incorporation of Limited Liability Partnership

The incorporation of the limited liability partnership is done by filing Form FiLLiP (Form for incorporation of Limited Liability Partnership) with the Registrar of Companies (ROC). This form is an integrated form that allows for the simultaneous application for DPIN (if not already obtained) and name reservation. Procedure for Incorporation:

• Fill out Form FiLLiP with the required details, including the registered office address, capital contribution and details of the designated partners.
• Attach the necessary documents, such as the proof of registered office, subscriber’s sheet and the consent of the designated partners.
• Pay the prescribed registration fees as per Annexure A of the Limited Liability Partnership Act.
• Submit the form to the ROC for approval.

Upon approval, the ROC will issue a Certificate of Incorporation, confirming the LLP’s registration. The limited liability partnership will then receive a Limited Liability Partnership Identification Number (LLPIN), which serves as its unique identification number.

Step 5: File Limited Liability Partnership (LLP) Agreement

The limited liability partnership Agreement is a crucial document that defines the mutual rights, duties and obligations of the partners, as well as the internal governance structure of the LLP. This agreement must be filed within 30 days of incorporation. Procedure to File Limited Liability Partnership Agreement:

• Draft the limited liability partnership Agreement, ensuring it covers all key aspects such as profit-sharing ratios, management responsibilities, admission and removal of partners and dispute resolution.
• Print the limited liability partnership Agreement on Stamp Paper, with the value of the Stamp Paper varying by state.
• File Form 3 on the MCA portal, attaching the limited liability partnership Agreement.
• Submit the form within 30 days of incorporation to avoid penalties.

Documents Required for Limited Liability Partnership Registration

A. Documents of Partners

• PAN Card/ID Proof: All partners must provide their PAN card as a primary identification document.
• Residence Proof: Partners can submit documents such as a Voter ID, Passport, Driver’s License or utility bills not older than two months.
• Passport (for Foreign Nationals/NRIs): Foreign partners must submit a notarized or apostilled copy of their passport, along with proof of address, such as a driving license or bank statement.
• Photograph: A recent passport-size photograph of each partner.

B. Documents of Limited Liability Partnership

• Proof of Registered Office Address: This includes the rent agreement, NOC from the landlord and utility bills (electricity, water or gas) showing the complete address.
• Digital Signature Certificate: One of the designated partners must obtain a DSC to sign the electronic documents during the registration process.

Limited Liability Partnership Forms

Various forms need to be filed during the limited liability partnership registration process and for ongoing compliance:

Form Name	Purpose
FiLLiP	Incorporation of Limited Liability Partnership
RUN LLP	Reservation of limited liability partnership name
Form 3	Filing of limited liability partnership agreement
Form 8	Statement of Account and Solvency
Form 11	Annual Return of Limited Liability Partnership
Form 24	Application for striking off the name of Limited Liability Partnership

Checklist for Limited Liability Partnership Registration

To ensure a smooth registration process, here is a checklist to follow:

• Minimum of Two Partners: Ensure that the limited liability partnership has at least two partners, one of whom must be a resident of India.
• Digital Signature Certificate (DSC): Obtain DSC for all designated partners to facilitate electronic filing.
• Designated Partner Identification Number (DPIN): Apply for DPIN for all designated partners.
• Name Approval: Reserve a unique name for the limited liability partnership that complies with the naming guidelines.
• Capital Contribution: Determine the capital contribution by each partner.
• Limited Liability Partnership Agreement: Draft and file the limited liability partnership Agreement, covering all aspects of the partnership.
• Registered Office Proof: Provide valid proof of the Limited Liability Partnership’s registered office address.

Post-Registration Compliance for Limited Liability Partnerships

After the successful registration of an LLP, there are several compliance requirements that must be met annually to avoid penalties:

• Annual Return (Form 11): LLPs must file an Annual Return within 60 days of the end of the financial year.
• Statement of Account & Solvency (Form 8): This form must be filed within 30 days from the end of six months of the financial year, detailing the LLP’s financial position.
• Income Tax Return: LLPs must file their income tax return annually by July 31st (for non-audit cases) or September 30th (for audit cases).
• Audits: LLPs with a turnover exceeding ₹40 lakh or a capital contribution exceeding ₹25 lakh must have their accounts audited.

Conclusion

The registration of a limited liability partnership in India is a systematic process that requires careful attention to legal formalities and documentation. LLPs offer a flexible, low-cost business structure with the added benefit of limited liability, making them an attractive option for small and medium-sized enterprises. However, entrepreneurs must be mindful of the compliance requirements and potential disadvantages, such as limited access to capital and significant penalties for non-compliance. By following the steps outlined in this guide and maintaining proper compliance, businesses can effectively leverage the advantages of a limited liability partnership to achieve their entrepreneurial goals.

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